UNIVERSAL FOOD CORPORATION VS.

CA 33 SCRA 1 FACTS: This is a petition for certiorari by the UFC against the CA decision of February 13, 1968 declaring the BILL OF ASSIGNMENT rescinded, ordering UFC to return to Magdalo Francisco his Mafran sauce trademark and to pay his monthly salary of P300.00 from Dec. 1, 1960 until the return to him of said trademark and formula. In 1938, plaintiff Magdalo V. Francisco, Sr.discovered a formula for the manufacture of a food seasoning (sauce) derived from banana fruits popularly known as MAFRAN sauce. It was used commercially since 1942, and in the same year plaintiff registered his trademark in his name as owner and inventor with the Bureau of Patents. However, due to lack of sufficient capital to finance the expansion of the business, in 1960, said plaintiff secured the financial assistance of Tirso T.Reyes who, after a series of negotiations, formed with others defendant Universal Food Corporation eventually leading to the execution on May 11, 1960 of the aforequoted "Bill of Assignment" (Exhibit A or 1). On May 31, 1960, Magdalo Francisco entered into contract with UFC stipulating among other things that he be the Chief Chemist and Second Vice-President of UFC and shall have absolute control and supervision over the laboratory assistants and personnel and in the purchase and safekeeping of the chemicals used in the preparation of said Mafran sauce and that said positions are permanent in nature. In line with the terms and conditions of the Bill of Assignment, Magdalo Francisco was appointed Chief Chemist with a salary of P300.00 a month. Magdalo Francisco kept the formula of the Mafran sauce secret to himself. Thereafter, however, due to the alleged scarcity and high prices of raw materials, on November 28, 1960, Secretary-Treasurer Ciriaco L. de Guzman of UFC issued a Memorandum duly approved by the President and General Manager Tirso T. Reyes that only Supervisor Ricardo Francisco should be retained in the factory and that the salary of plaintiff Magdalo V. Francisco, Sr., should be stopped for the time being until the corporation should resume its operation. On December 3, 1960, President and General Manager Tirso T. Reyes, issued a memorandum to Victoriano Francisco ordering him to report to the factory and produce "Mafran Sauce" at the rate of not less than 100 cases a day so as to cope with the orders of the corporation's various distributors and dealers, and with instructions to take only the necessary daily employees without employing permanent employees. Again, on December 6, 1961, another memorandum was issued by the same President and General Manager instructing the Assistant Chief Chemist Ricardo Francisco, to recall all daily employees who are connected in the production of Mafran Sauce and also some additional daily employees for the production of Porky Pops. On December 29, 1960, another memorandum was issued by the President and General Manager instructing Ricardo Francisco, as Chief Chemist, and Porfirio Zarraga, as Acting Superintendent, to produce Mafran Sauce and Porky Pops in full swing starting January 2, 1961 with further instructions to hire daily laborers in order to cope with the full blast operation. Magdalo V. Francisco, Sr. received his salary as Chief Chemist in the amount of P300.00 a month only until his services were terminated on November 30, 1960. On January 9 and 16, 1961, UFC, acting thru its President and General Manager, authorized Porfirio Zarraga and Paula de Bacula to look for a buyer of the corporation including its trademarks, formula and assets at a price of not less than P300,000.00. Due to these successive memoranda, without plaintiff Magdalo V. Francisco, Sr. being recalled back to work, he filed the present action on February 14, 1961. Then in a letter dated March 20, 1961, UFC requested said plaintiff to report for duty, but the latter declined the request because the present action was already filed in court. ISSUES: 1. Was the Bill of Assignment really one that involves transfer of the formula for Mafran sauce itself? 2. Was petitioners contention that Magdalo Francisco is not entitled to rescission valid? RULING:

1. No. Certain provisions of the bill would lead one to believe that the formula itself was transferred. To quote, the respondent patentee "assign, transfer and convey all its property rights and interest over said Mafran trademark and formula for MAFRAN SAUCE unto the Party of the Second Part," and the last paragraph states that such "assignment, transfer and conveyance is absolute and irrevocable (and) in no case shall the PARTY OF THE First Part ask, demand or sue for the surrender of its rights and interest over said MAFRAN trademark and mafran formula." However, a perceptive analysis of the entire instrument and the language employed therein would lead one to the conclusion that what was actually ceded and transferred was only the use of the Mafran sauce formula. This was the precise intention of the parties. The SC had the following reasons to back up the above conclusion. First, royalty was paid by UFC to Magdalo Francisco. Second, the formula of said Mafran sauce was never disclosed to anybody else. Third, the Bill acknowledged the fact that upon dissolution of said Corporation, the patentee rights and interests of said trademark shall automatically revert back to Magdalo Francisco. Fourth, paragraph 3 of the Bill declared only the transfer of the use of the Mafran sauce and not the formula itself which was admitted by UFC in its answer. Fifth, the facts of the case undeniably show that what was transferred was only the use. Finally, our Civil Code allows only the least transmission of right, hence, what better way is there to show the least transmission of right of the transfer of the use of the transfer of the formula itself. 2. No. Petitioners contention that Magdalo Franciscos petition for rescission should be denied because under Article 1383 of the Civil Code of the Philippines rescission can not be demanded except when the party suffering damage has no other legal means to obtain reparation, was of no merit because it is predicated on a failure to distinguish between a rescission for breach of contract under Article 1191 of the Civil Code and a rescission by reason of lesion or economic prejudice, under Article 1381, et seq. This was a case of reciprocal obligation. Article 1191 may be scanned without disclosing anywhere that the action for rescission thereunder was subordinated to anything other than the culpable breach of his obligations by the defendant. Hence, the reparation of damages for the breach was purely secondary. Simply put, unlike Art. 1383, Art. 1191 allows both the rescission and the payment for damages. Rescission is not given to the party as a last resort, hence, it is not subsidiary in nature. Guzman vs Bonnevie 86150 Facts: Bonnevie entered into a contract of lease with Reynoso with a right of first refusal. This right of first refusal included the condition that the full details of the sale price must be disclosed and at par to whoever has interest to buy. Reynoso decided to sell the land to petitioner and allegedly sent a letter to the respondent. Upon no response from respondent, reynosos sent another letter stating that the land has been sold and requesting them to vacate. Respondents refused to vacate and attacked the said sale on the ff grounds: 1. Right of first refusal was denied 2. Contract can be rescinded due to breach Issue: WON the contract was rescissible or not. Held:Yes. 1. First it was not proven that the letter of notice was actually receied by the Bonnevies. 2. Petitioners violated the right of first refusal in that what they offered to respondents was higher than what was offered to petitioners with different terms of payment. 3. Respondents have a right to rescind the contract because Reynoso violated the terms of the contract.

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Bonnevies are third party in interest to the case. Under 1380-1381 third parties that may have material damage to the sale can rescined the contract as creditors. There is economic prejudice if the sale between Guzman and Reynoso takes place. Petitioners are not buyers in good faith because they admitted that there was a subsisting contract of lease under litigation.

Cabaliw v Sadorra L-25650 Facts: Cabaliw is the second wife of respondent. She won a case for support against respondent but the latter failed to follow the court order. After a contempt and writ of executionwere ordered by the court, respondent husband sold the only two conjugal properties to his son in law, husband of his daughter from the first marriage. Cabaliw assailed the decision under art 1381, in fraud of creditors. The defense of respondents are: that they enjoy the presumption of validity and that fraud must be proven convincingly considering that the sale was a public instrument and also that the husband has the right to sell his conjugal properties without consent from the wife. Issue: WON,the sale was fraudulent and WON the sale by the husband required no notice from wife. Held: No to both. 1. Under 1381, presumption of fraud is the exception to the rule that applies here. 2. There were several indicia of guilt; a. The timing of the sale b. The sale consisted of the only 2 properties c. The buyer knew of the pending case d. The buyer is a son in law e. The buyer knew there were no other properties 3. The issue of the sale of conjugal property by the husband without consent from the wife was never brought up in the lower court and thus cannot brought up now. Oria v Mcmiking 7003 Gutierrez Hermanos brought several actions for the recovery of debts by the company Oria Hermanos. Oria, herein petitioner, soon dissolved its company and sold it to Manuel Gonzales. This included the sale of a steamship called Serrantes. Upon execution of the sheriff against the company, it auctioned the steamship in favor of Hermanos. Now, the new owner Gonzales is questioning the sale stating that he is the owner of the ship and not the Orias company. Hermanos claims that the sale made between Gonzales and Orias was fraudulent and thus was not valid. Issue: WON the sale was valid. Held: No. It was fraudulent for the following reasons: 1. Value of the company was at 274,000 but was sold at 160,000. 2. Vendee was nephew of the partnership members. 3. Vendee was only 25 when sale was made, incapable of managing a business 4. Vendee was fully aware of the suits against seller. 5. There was no consideration. 6. The prohibiton in the contract against the sale of the properties offered no security. Badges of fraud present: 1. The fact that the consideration of the conveyance is fictitious or is inadequate. 2. A transfer made by a debtor after suit has been begun and while it is pending against him. 3. A sale upon credit by an insolvent debtor.

4. Evidence of large indebtedness or complete insolvency. 5. The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly embarrassed financially. 6. The fact that the transfer is made between father and son; when there are present other of the above circumstances. 7. The failure of the vendee to take exclusive possession of all the property. Siguan v Lim 134685 On 25 and 26 August 1990 Lim issued checks and bounced 31 July 1990 - Lim is civilly liable of against Suarez 2 July 1991 - deed of donation was registered 10 August 1989 - date of the donation made to her sons 23 June 1993 - metrobank filed a case for accion pauliana Lim denied saying sale was made before the case against metrobank and that the case against suarez was erroneous. RTC ruled in favor of petitioner. CA reversed decision in favor of Lim. Issue: WON there was fraud in the deed of donation. Held: No. Tihrd and fourth requisite of accion pauliana not present. 1. It was not proven that petitioner has exhausted all means and that there are no other means to collect. 2. The public document enjoys regularity and was not attacked successfully. 3. When the deed of donation was executed, Lim had numerous other properties. 4. Petitioner failed to discharge the burden of proving any of the circumstances enumerated above or any other circumstance from which fraud can be inferred 5. Only the creditor who brought the action for rescission can benefit from the rescission; the revocation is only to the extent of the plaintiff creditor's unsatisfied credit